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Figure 1


Bitcoin has realized overall gains worth $78 billion so far

This second phase of people rapidly realizing large USD gains is twice the amount of profits we saw in the first phase of 2017

It was another landmark week for Bitcoin & the associated cryptos. BTC continues to make deeper inroads in the unchartered territory. Apart from hitting another all-time high (ATH) of over $56k at the time of writing, the premier digital assets also reached the distinction of having a $1 trillion market cap. So in essence, it has joined the elite group of big tech companies in the trillion-dollar club. Ethereum, the second-largest crypto, continues to hit ATHs as well — with the most recent one around $1972. The total Crypto market cap is hovering around $1.7 trillion.

Latest in Chainalysis Market Intel provides some insights into the profits made by Bitcoin traders/investors so far. But before that, let’s analyze the short-term outlook. Bitcoin inflows to exchanges are low, with a 7-day average inflow of 61k bitcoin compared to the 30 day average of 81k bitcoin & Bitcoin trade intensity is rising. Low inflows and high trade intensity coupled with rising prices in the digital asset suggest that increasing demand in the face of the scarce supply should keep pushing upward pressure on the BTC price.

According to Chainalysis data, the realized gain of bitcoin between entering and exiting exchanges is $78 billion over all-time (Figure 1) — in other words, all the bitcoin ever deposited on exchanges was bought immediately and then only sold when it was withdrawn, the profit from that trade so far would be $78 billion. More than half of this gain was made in the 15 weeks since the start of November 2020. Here’s the breakup for the total gains going back to 2017, when the first set of gains realized.

➤ 13% of this $78 billion gain was made before the start of Q4 of 2017

➤ 25% of this gain was made just in the last quarter of 2017

➤ Only 8% of this gain was realized, from the start of 2018 to Nov. 2020

➤ And a massive 54% gain was made since Nov. 2020–the last 15 weeks

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Figure 2

The overwhelming credit for the exponential rise in Bitcoin has been attributed to the ballooning institutional interest in the last 12 months or so. Keeping that in mind, this second chart (Figure 2) indicates an interesting prospect. According to the data, Large investors, who typically trade OTC (over the counter), appear to have reduced their holdings, by 192k bitcoin in the week of 8 February. This up & down move has been the hallmark for the past 4 weeks.

For the BTC price to continue to rise, however, the large investors need to buy more not less bitcoin. After an extraordinary spate of gains, and the BTC price crossing over the psychological barrier of $50k, it seems that these large investors are adopting a cautious approach. The question remains — how come BTC price is still rising? It seems like strong retail demand on the exchanges is balancing this wait-and-see approach by bigger investors.

Whatever the case may be, one thing is more sure, Bitcoin has entered a new phase of a bull supercycle. Even if there is a sideways consolidation in the price or even a bigger correction, the long-term trajectory remains on the upside.

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